FAQs

Wealth Accounting and the Valuation of Ecosystem Services

What is WAVES?

WAVES stands for Wealth Accounting and the Valuation of Ecosystem Services. The WAVES Global Partnership Program (WAVES-GPP) is a global partnership that aims to promote sustainable development by ensuring that accounting for natural resources is mainstreamed into development planning. The Philippines has been selected as one of the eight core implementing countries of the Wealth Accounting and Valuation of Ecosystem Services Global Partnership Program.

What is wealth accounting

Wealth Accounting measures three forms of assets and capital goods that a country generates: 1. Manufactured capital such as buildings and public infrastructure; 2. Human, social and institutional capital, such as a country’s level of education, rule of law and governance; and 3. Natural capital such as land, forests, fish, minerals and energy.

But Gross Domestic Product (GDP) is the recognized measure of economic growth. Why change it?

Countries rely on GDP as a measure of its economic performance. However, GDP only measures current income and production. It tells us nothing about income for the long term. It does not answer questions like: are income and growth sustainable? Will the same level of income be available for our children?

GDP says nothing about the assets that underpin this generation of income. For example, when a country exploits its minerals, it is actually depleting wealth. The other major limitation of GDP is the poor representation of natural capital. Important contributions to the economy and well-being of the environment provided by forests, wetlands, and agricultural land are not fully captured in national accounts or may be hidden.

What is natural capital accounting and why is it important for a country like the Philippines?

Natural capital includes the resources that we easily recognize and measure such as minerals, agricultural land and fisheries. It also includes ecosystems producing services that are often ‘invisible’ to most people such as air and water filtration, flood protection, and habitat for fisheries and wildlife. We often take these services for granted and do not know what it would cost if we lose them.

Natural capital is a critical asset, especially for low-middle income countries like the Philippines where it makes up a significant share (about a third) of total wealth. For these countries, livelihoods of many subsistence communities depend directly on healthy ecosystems.

Natural capital accounting can provide detailed statistics to better manage these natural resources and ultimately ensure sustainable growth of the economy.

How can wealth accounting help countries grow sustainably?

Comprehensive wealth accounting can provide an estimate of the total wealth of nations by measuring the value of these different components of wealth. Changes in wealth is an indicator to assess if a country is growing its income without depleting its stocks.

What will the Phil-WAVES project do for the Philippines?

A more sustainable use of natural resources could potentially have a large impact on growth through reducing poverty and risks from natural disasters and climate change.

In the Philippines, there will be two Phil-WAVES pilot sites: Laguna Lake Basin and Southern Palawan. The NCA data gathered will help in assessing the multiple and sometimes competing uses of the natural resources in these areas and provide detailed statistics on how to manage these resources and ensure they continue to contribute to the sustainable growth of the economy.

There will also be two national accounts developed: one for minerals and another for mangroves. The data that is gathered will be used to analyze their contribution of ecosystem services to sustainable, inclusive and resilient growth and disaster risk mitigation (in the case of mangroves).

Who is working on the Phil-WAVES project?

The Phil-WAVES project is being led by the National Economic and Development Authority and the Philippine Statistics Authority (PSA) through a technical assistance grant given by the World Bank.

Government agencies will take the lead in providing and collecting the data for their respective Phil-WAVES pilot sites or national accounts: 

• Laguna Lake Basin: the Laguna Lake Development Authority 
• Southern Palawan: the Department of Environment and Natural Resources along with the Palawan Council of Sustainable Development 
• Minerals account: DENR Mines and Geosciences Bureau and PSA 
• Mangroves: DENR and PSA

Natural Capital Accounting

What is natural capital?

Natural capital includes all of the resources that we easily recognize and measure, like minerals,energy, timber, agricultural land, fisheries and water. It also includes the ecosystem services that are often “invisible” to most people, such as air and water filtration, flood protection, carbon storage, pollination of crops, and habitats for wildlife. These values are not readily captured in markets, so we don’t really know how much they contribute to the economy. We often take these services for granted and don’t know what it would cost if we lost them.

Why does natural capital matter for economic growth? Isn’t GDP enough?

Gross Domestic Product (GDP) measures the value of goods and services produced over one year. This is an incomplete assessment of a country’s economic well-being because GDP only looks at one part of economic performance—output— but tells us nothing about income in the long term. GDP doesn’t take into account the wealth underpinning this output. For example, when a country exploits its minerals, it is actually using up its finite mineral wealth.

A full picture of a country’s wealth – obtained through a methodology called ‘wealth accounting’ – includes all assets that contribute to our economic well-being, from buildings and factory machines, to infrastructure, human and social capital, and natural capital.

Natural capital is especially important to many developing countries because it makes up a large share of their total wealth – some 36 percent – and the livelihoods of many subsistence communities depend directly on healthy ecosystems. But currently GDP ignores natural capital. In forestry, for example, timber resources are counted, but forest carbon sequestration is not. Other services, like water regulation that benefits crop irrigation, are hidden and the value is (wrongly) attributed to agriculture in a country’s GDP.

What are nCA? How are they different from the accounts that countries keep now?

Natural Capital Accounts (NCA) are sets of unbiased data for material natural resources, such as forests, energy and water. NCA follow an international standard approved by the United Nations Statistical Commission, called the System for Environmental-Economic Accounts (SEEA).

Countries already produce data-sets based on the internally agreed System of National Accounts (SNA). These data-sets describe a country’s economic performance, and form the basis for calculating GDP and other well-known economic indicators, such as balance of trade and household consumption. While national accounts are limited to the production boundary of the economy, natural capital accounts go beyond that, to account for natural goods and services that aren’t subject to market transactions and don’t necessarily have well established market prices.

It is in the interest of all countries to move beyond traditional GDP. Incorporating natural capital into national accounts will reveal the interactions of economic activity with the environment, and support better economic decisions.

What is natural capital accounting and why is it important for a country like the Philippines?

Natural capital includes the resources that we easily recognize and measure such as minerals, agricultural land and fisheries. It also includes ecosystems producing services that are often ‘invisible’ to most people such as air and water filtration, flood protection, and habitat for fisheries and wildlife. We often take these services for granted and do not know what it would cost if we lose them.

Natural capital is a critical asset, especially for low-middle income countries like the Philippines where it makes up a significant share (about a third) of total wealth. For these countries, livelihoods of many subsistence communities depend directly on healthy ecosystems.

Natural capital accounting can provide detailed statistics to better manage these natural resources and ultimately ensure sustainable growth of the economy.

How are natural capital accounts used?

The Wealth Accounting and Valuation of Ecosystem Services (WAVES) is a global partnership, announced by World Bank President Robert B. Zoellick in Nagoya, Japan, in 2010. It supports countries preparing to implement Natural Capital Accounting based on the SEEA.

WAVES comprises the United Nations Environment Programme, the UN Development Programme, and the UN Statistical Commission; the countries of Botswana, Colombia, Costa Rica, Guatemala, Indonesia, Madagascar, the Philippines and Rwanda; as well as donors and supporters, including Australia, Canada, France, Japan, Norway, the United Kingdom, and several NGOs. These partners want to take Natural Capital Accounting beyond just material resources, such as timber and minerals, as approved by the SEEA. They also want to include ecosystem services - such as forests for pollination and wetlands for reducing flooding - and other natural resources that are not traded or marketed, and are therefore harder to measure. A Policy and Technical Experts Committee, following the processes set up by the UN Statistical Commission, was established to take this forward.

Isn’t valuing natural capital really about privatizing nature?

Natural Capital Accounting is about measurement and information—for example, determining how much water is being used by which sector. The objective is to use this information for better government decision-making. Knowing the total value of natural capital can also help to address poverty issues. Conversely, not knowing the value of natural capital can result in losses that negatively affect the poor. For example:

• Failing to value the coastal protection services provided by mangroves can lead to massive conversion of mangroves into shrimp farms, at the cost of livelihoods (from loss of fish habitat and other mangrove products) and increased damage from storms.

• Lack of information about the value of forests for maintaining downstream water resources, grazing for livestock, and soil retention, can lead to clear-cutting and the loss of these services.

The key is to measure not just the total value of natural assets, but also how these benefits are distributed, how much goes to each stakeholder group, and the extent to which each group – especially the poor - depends on them.

What results have WAVES countries achieved so far?

As recently as 2010, NCA was mostly limited to high-income countries. Since then, WAVES has demonstrated that it is possible to do accounts in developing countries and to use them to inform national development plans and policies. Many partner agencies and middle-income countries have now started their own NCA initiatives.

In all eight of the WAVES countries (Botswana, Colombia, Costa Rica, Guatemala, Indonesia, Madagascar, the Philippines and Rwanda), NCA work is guided by a high-level National Steering Committee chaired by a Ministry of Development Planning or Finance. In most of the WAVES countries, governments have dedicated resources and staff in key agencies to implementing NCA, and results from these accounts are influencing national strategies. For example, water accounts in Botswana have been identified as an important tool for water sector reforms, while mineral accounts are helping to develop fiscal rules on management of mineral revenues.

WAVES also contributes to the development of NCA methodologies, notably by leading a process of testing ecosystem accounting, and providing guidance and capacity building for implementation. In terms of building awareness and understanding of NCA, the WAVES newsletter and website report NCA activities globally, and the recently launched Knowledge Center provides resources for individuals and countries.

Southern Palawan

Why was Southern Palawan chosen as the pilot site for the ecosystem account?

Southern Palawan is an area that is highly mineralized, has rich levels of biodiversity, relatively rich fishing grounds supported by extensive mangrove forests, seagrass beds and coral reefs. The area is home to a number of indigenous tribes with strong potential for conservation, tourism and agriculture.

Southern Palawan was selected as one of the two test sites for the Phil-WAVES project because of the competing demands on its natural capital including biodiversity where ecosystem accounting following the ridge-to-reef approach can be demonstrated in an island setting.

What was the data produced for Southern Palawan and who were  involved?

The variety of ecosystem services supplied and the need to address competing resource use claims makes Southern Palawan an excellent case study area for testing the ecosystem accounting approach.

The Southern Palawan ecosystem account has been tested in three different levels of management areas:

(i) the Southern Palawan region
(ii) Pulot watershed which is the largest watershed in the region
(iii) the coastal zone of Sofronio Española municipality

A Technical Working Group consisting of members from the Department of Environment and Natural Resources (DENR), the Palawan Council for Sustainable Development (PCSD), Western Philippines University, the Local Government of Sofronio Española, as well as international and national experts led the research of the ecosystem accounts. The technical expertise of the group covered the disciplines of ecology, agronomy, forestry, hydrology, marine fisheries, policy analysis, GIS analysis and economics.

But we already know about deforestation, what is new?

True, but this is the first time that we have scientific evidence-based information that will tell us a number of things. For example, the data can show us how much resources we have in physical terms and the monetary value of services of selected ecosystems; the degree of deterioration; and because of the mapping technology used, where these areas are. In addition, the accounts show how changes in ecosystems are impacting biodiversity and people.

More importantly, the Philippine government expects that the resulting methodologies and framework of this pilot study can be applied in different settings in other parts of the country where indicators, tools, and methodologies are required to inform development planning and policy analysis in support of the goals of sustainable use of natural resources, economic growth, and alleviating poverty.

How will this information help manage the ecosystem services?

The experimental ecosystem accounts produced through this study can support policy making in three important ways.

First they can inform policymakers of the status, uses and monetary values of ecosystems. For instance, the account can indicate sensitive areas where there are concerns on ecosystems or areas that are particularly important for supplying ecosystem services.

Second, they can alert policymakers to trends in ecosystems and the services they supply. This information can be used to forecast the potential impacts of current human and economic activity in the area and can better inform future policies on sustainable development and conservation.

Third, the accounts allow monitoring trends in ecosystems over time, providing information that can help evaluate the effectiveness of specific policies.

Laguna Lake

What is What is ecosystem accounting capital?

Ecosystems are an intricate web of interdependence between humans and nature. We depend on ecosystems for our basic needs such as food, water and fuel. We also use its natural resources to drive our economies.

Some of these resources are reflected in our country's GDP. But services naturally provided to us by a healthy, well-functioning ecosystem such as food control, air and water filtration and soil erosion prevention are neither quantified nor assessed for their economic value.

Ecosystem accounting is a way of accounting for the all the benefits--both concrete and intangible--that ecosystems give us. In accounting for all the value nature provides us, we can manage these resources more sustainably and leave a healthier planet for future generations.

The framework of ecosystem accounting is based on the System of Environmental-Economic Accounting (SEEA), an internationally agreed standard of concepts, denitions, classications, accounting rules and tables for producing internationally comparable statistics on the environment and its relationship with the economy

What are ecosystem services?

Ecosystem services are the benefits people obtain from nature's ecosystems. Tangible benefits are used in economic and other human activity such as the use of timber to build houses or for energy. There are other ecosystem benefits that are intangible like water purification and good control. Without these ecosystem services, our quality of life would be reduced.

Ecosystem services are classified into three types: 

1. Provisioning services - reacts material and energy contributions generated by or in an ecosystem. For example, a sh or a plant with pharmaceutical properties. The associated benefits may be provided in agricultural systems, as well as within semi-natural and natural ecosystems.

2. Regulating services - results from the capacity of ecosystems to regulate climate, hydrological and bio-chemical cycles, earth surface processes, and a variety of biological processes. It is also commonly referred to as "regulating and maintenance services".

3. Cultural services - relate to the intellectual and symbolic benefits that people obtain from ecosystems through recreation, knowledge development, relaxation, and spiritual reflection.

What is the WAVES partnership and how is it related to ecosystem accounting?

WAVES stands for Wealth Accounting and the Valuation of Ecosystem Services, a global partnership that aims to account for the natural capital and services provided by ecosystems to know the full value of these resources for better planning.

The Philippines has been selected as one of the eight core implementing countries where the WAVES Global Partnership Program (WAVES - GPP) has been launched.

Why was Laguna Lake chosen as the pilot site for the ecosystem account?

The Laguna Lake is the largest inland body of water in the Philippines and the third largest in Southeast Asia. Around 100 rivers and streams drain into the lake with the largest contribution of inflow coming from the Pagsanjan River. The Laguna Lake Region is a multiple-use resource that provides food, transportation, energy and shelter to the provinces of Rizal and Laguna; selected towns in Cavite and Batangas, and Quezon; and the cities of Muntinlupa, Taguig, Pasig, Marikina, Quezon, Caloocan, Pasay and Manila.

The Laguna Lake is an example of an ecosystem that supports the life, economy and well-being of a large urban population. It also serves as a case study of an ecosystem that is threatened by various alarming issues.

What was the data produced for the Laguna Lake and who were involved?

What was the data produced for the Laguna Lake and who were the agencies/organizations involved in putting together this data? There were four experimental ecosystem accounts that were produced for Laguna Lake:

1. Land account containing land cover and changes

2. Ecosystem condition account containing various water quality indicators, soil types and elevation, changes in bathymetry and sediment loading

3. Ecosystem production account indicating the ow of ecosystem services such as shery production, water supply, ood mitigation and soil erosion regulation 

4. Ecosystem asset account showing the levels of water and shell stock

The Laguna Lake Development Authority took the lead in developing these four ecosystem accounts. Starting from several of its technical units undertook the analysis supported by international and national experts

what is new about this information you're telling me?

True, but this is the first time that we have scientific evidence-based information that will tell us two things: the degree of deterioration and which parts of the lake are most affected.
sources: https://www.wavespartnership.org/en/wealth-accounting-and-WAVES, 
https://www.wavespartnership.org/en/knowledge-center/southern-palawan-frequently-asked-questions,
https://www.wavespartnership.org/en/knowledge-center/laguna-lake-basin-frequently-asked-questions